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To escape SARS penalties and audits, avoid this common travel allowance mistake at all costs

by , 14 July 2014
A travel allowance is the sum of money you give an employee regularly, to cover her business travel costs.

For example, you give Jennifer money so she can drive to and from client meetings.

When it comes to travel allowances, there's one common mistake you need to avoid at all costs.

If you don't, you might have to pay a 10% penalty for under deducting Pay As You Earn (PAYE). What's more... SARS could find you guilty of tax evasion and slap you with a 200% penalty.

Since that's a risk your company can't afford to take, take a look at this common travel allowance mistake so you can avoid it and escape penalties and SARS audits.

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Avoid THIS common travel allowance mistake at all costs

The biggest mistake companies make is suddenly removing their travel allowances – SARS will notice the change and slap your business with penalties.

Let's say, for the last five years, you've given everyone in your company a travel allowance, including your secretary, who never travels for work.

But you realise that SARS takes a dim view of travel allowances so you suddenly stop awarding them to staff.

SARS WILL pick this up on your IRP5s and your PAYE returns!

It'll assume the sudden change on your part is an admission that the travel allowances you gave your employee weren't necessary. It'll then question your previous salary structures. After this, you'll have penalties coming your way.

To avoid the wrath of SARS, use this solution: If you realise a staff member is getting an allowance, but he doesn't deserve it, don't just increase his basic salary by the value of the previous travel allowance. Instead, record the allowance as fully taxable.

Just remember that you have to get your employee's consent to voluntarily over-tax. This way, you'll reduce the risk of SARS assessing your company when it audits your employees. Also make changes to your employee's contract of employment, if needs be.

There you have it: Escape penalties and SARS audits by avoiding this common travel allowance mistake.

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